There's no need to fast forward far into the future to see dramatic changes in the way credit unions do business.
In a Tuesday afternoon session at the America’s Credit Union Conference in Seattle, WA, Ben Rogers, managing director of research at the Filene Research Institute, shared his take on what credit unions will be up to in 2025.
Credit unions can expect to see their numbers continue to shrink, down to approximately 4,000 based on the current rate of mergers and liquidations. Among the new realities will be learning to lend to a new generation of borrowers who want to share cars (how do you insure and lend against that collateral?) and have to share homes (how do you create multi-generational lending, deposit, and checking products?).
“In the next 10 years, topics of constant discussion will include consolidation, payments, regulation, technology, and lending,” Rogers said.
He made these predictions:
Mobile identity: The smartphone won’t just be about transactions. Location features and the camera will allow financial institutions to run credible “Know Your Customer” screens entirely.
ATMs go the way of pay phones: Mobile means ATMs will phase out over the next 10 years, mainly by attrition. (Branches will remain popular, because even though face-to-face is no longer needed for lending, people still like to talk to people.)
A la carte payments pricing: As services such as remittances, wires, and foreign exchange start to adopt blockchain technologies, wholesale prices for them could be pushed to close to zero.
As far as regulations, Rogers said, watch for the aftermath of lending startups — now huge lenders themselves — who unbundle lending products from credit unions and banks become the recipient of regulations themselves. He pointed to Prosper losing its fight with the Securities & Exchange Commission and the Lending Club seeking and winning SEC approval quickly as just the beginning.
Here are two more lists from Rogers’ presentation:
Credit Union Ecosystem In 2025:
Consolidation means the shared branching network will be fully integrated for nearly all credit unions.
Small credit unions will continue to struggle for membership and asset growth. Those with less than $100 million in assets lost 6 million members and $5 billion in assets from 2007 to 2012. That trend continues.
The big leagues: State credit union leagues will continue to merge, from 37 to 25. That will allow leagues to do more, but they’ll have to work harder to make relationships work on state and national levels, especially with changes.
Consumer Behavior In 2025:
Sustainability: Renewable energy and resource conservation will explode in importance, aiding credit unions that support such initiatives at the product level.
Mobile first (wearables, too): Situationally aware banking apps will help members with their financial/spending decisions.
Car ownership shifts: Millennials are less likely to own two or three cars. They won’t go straight to Uber but auto growth will decline.
“Millennials are leading the charge toward collaborative, collective consumption,” Rogers said. “Entrepreneurs are capitalizing on this trend to offers consumers worldwide access to pools of products and services, inspiring them to own less and share more.”
How can credit unions respond to this growing shared economy and its shared autonomy? By being a credit union.
“Instead of a loan to an individual, there’ll be a lot of ownership by networks,” Rogers said. “Make sure you’re there to give them the loan they need when they need it.”
Finally, Rogers said, Filene asked a group of 18 credit union CEOs what they see as their path to survival and continued relevance? Mobile and data excellence were the biggest responses.
CUNA Adds Distributing Blockchain To Ledger
CUNA used the ACUC platform on Wednesday to announce its bid to lead the credit union’s industry’s foray into the coming wave of distributed ledgers — blockchain technology — that promises to revolutionize financial services management and delivery in coming years.
Blockchain technology gained mainstream attention in the form of Bitcoins. It’s a system of distributed, shared ledgers that are synchronized and shared across a network that some proponents say can be as big as the global financial system itself.
CUNA aims to spur the development of a closed credit union/CUSO system of distributed ledgers through the newly launched CU Ledger Initiative. It follows by a few years the trade group's leadership in trying to create connective software through the Credit Union Financial Exchange (CUFX).
“This solution is coming, this is the next generation of technology,” CUNA COO Rich Meade said of the distributed ledger effort. “I think we want to own this and do it our own way rather than fall behind or chase behind somebody else.”
That somebody else includes the big banks that are investing billions in distributed technology, and big banks don’t play with that kind of money. This is real. Santander estimates blockchain technology could cut banks’ infrastructure costs by up to $20 billion beginning just five years or so from now.
CUNA has partnered with the Mountain West Credit Union Association and other system stakeholders to begin developing a distributed-ledger network for credit unions.
“The goals for the project will be to remove barriers to entry for all credit unions; normalize the platform before its introduction; create interoperability among credit unions regardless of cores, third-party products, or platforms; and quick adoption,” the trade group said.
Well-known industry technologists including Rudy Pereira, CEO at Royal Credit Union ($1.8B, Eau Claire, WI), and John Best of Best Innovation Group, also are involved, CUNA said, along with CO-OP Financial Services, PSCU, CUDL. The trade group is seeking other partners and investors, with $10,000 as an initial suggested price of entry.
CUNA also used the Seattle conference to kick off a new awareness initiative it created based on 16,000 interviews and 12 statewide polls, and thousands of other data points gathered from focus groups with members and non-members alike over the past 16 years.
CUNA plans to act as a resource for the initiative, which it says is not an ad campaign but an open-ended, sustainable effort to help credit unions help consumers take advantage of the credit union difference.
The opportunity is there, the trade group said, citing research that shows a great majority of American consumers don’t really know what a credit union is, but once they do, are very inclined to join.
The average age of a credit union member in the United States right now is 48.5. And only 7% of people ages 18 to 24 are credit union members.
“We can address this problem with empirically proven key messages that shift consumer sentiment and financial behavior,” said Teresa Freeborn, president and CEO of Xceed Financial Credit Union ($947.7M, El Segundo, CA), and chair of the initiative’s advisory board.
The biggest asset in the effort will be the 350,000 employees and volunteers of the nation’s 6,000 credit unions. CUNA will provide tools such as social media tips and strategy, weekly shareable graphics for social platforms, and digital amplification of top content via social media.
Other collateral will be geared toward helping credit unions spread the message through traditional media, including advice and templates for selling stories to broadcast and print outlets.
The effort also will include a hub that will serve as a learning site where state leagues and credit unions can upload content and share best practices and take advantage of state-by-state financial scorecards that highlight how credit unions deliver value beyond banks.
Freeborn explains the opportunity and rationale for the initiative in this column published in CU Journal.
“CUNA will act in a high-level strategy and advisory role, but this initiative's success will hinge on the guidance and support of Leagues and individual credit unions, who know their members and markets best,” Freeborn said.
CUNA is seeking credit unions that want to get directly involved and invites emails to firstname.lastname@example.org.
More Callahan Coverage From ACUC
(Final thought: Today the news is out that perhaps the pre-eminent, and certainly pioneering, writer about technology and accelerating change for people and institutions has passed. Here's a top-line obituary for Alvin Toffler, visionary author of Future Shock.)